Birthmark Effect: Founder Status and Firm Survival in Revolutionary Russia, 1861-1914

Abstract

Status research typically assumes that status hierarchy is legitimate and stable, but this assumption may not hold during social revolutions which destabilize political, economic, and social institutions. We predict that, during revolutionary times, businesses whose founders are linked to a declining “power elite” group have higher failure rates than businesses without such a “status birthmark.” Moreover, this status birthmark effect is stronger for larger businesses whose resources and salient identity could become their liability. We tested these hypotheses by examining business survival in late Imperial Russia (1861-1914), one of the major revolutionary times in world history. Results show that firms whose founders were from the declining “power elites” (nobles, government officials, and military officers) were more likely to fail during this period than other status groups (e.g., merchants), and this risk was stronger for larger firms. Our study highlights how a once coveted status symbol may become a liability for businesses during radical institutional changes. Keywords: Status; Founder; Social Revolution; Institutional Change; Organizational History